Conceptually the idea was to take truly blighted properties that the owners were not able to renew, consolidate into one large parcel and sell to a developer who may have additional expertise and a track record with the money markets to do a new project. It might be retail, commercial, industrial or low income housing. All of which sounds innocuous enough until you get to the fine points. Like the original owner who is quite happy with the way things are and does not want to sell. This is when eminent domain comes into play. Or part of the property and sales tax dollars being diverted away from the general fund that pays for our services into the Redevelopment Agency.
These things are all accomplished under the Health & Safety code by taking a property area and putting it in a separate taxing district. The tax level at time of plan’s start date is spoken of as the "frozen value" and any increase in property tax above that frozen value is called the "tax increment." As development happens in the plan area the taxes paid up to the frozen level go into the general fund as before while the new taxes above the old "frozen value" level will go to the Redevelopment Agency to spend as they see fit. It has been common in the past for the County and the schools to "pass through" their portions of the increased new taxes to the Redevelopment Agency as well.
These new funds were designed to be used to assist new development in the plan area, usually through land value writedown, through infrastructure improvements, building loans or grants. The combination and amounts are negotiable with the developers or owners. Another incentive used is the refund to the developer of a business’s 1% sales tax revenue that they generate. Sales tax dollars are general fund dollars to be used for services and when given away, they have to be replaced by other taxes, utility taxes for example.
It is very common for car dealers and big box retailers to play off one town against another in this negotiation process. That’s how the Price Club got to Norwalk and Wal-Mart got to Paramount. The Fountain Valley deal with Price Club was so flagrant it was the stimulus for the law to be changed. The stealing of car dealers from one town by another has prompted further changes.
Here in Downey the Acura deal was particularly convoluted and is therefore interesting. The car agency was originally scheduled to be built further west on Firestone Blvd. on leased ground outside the Amendment 4 area. Therefore the new property taxes generated from the new construction would have gone into the general fund. Instead City intervention moved the site to its present location inside Amendment 4 boundaries so now the new taxes go into the Redevelopment Agency’s fund. Also, because a land sale was involved a new base was set on land values too. This further increased the taxes (money) to the Agency.
The essential details are that Acura very properly bought the three acres from the owner for 3 million dollars with the city returning an amount equal to 60 percent of the sales taxes generated for 10 years, up to 1.75 million dollars, whichever comes first. There is a reasonable expectation that this will be accomplished and all very legal.
What is really wrong is there was a clear intent to move the agency inside the redevelopment area so that the tax increment dollars would go to the Redevelopment Agency coffers instead of to the general fund which is now standing the loss of the sales tax dollars as well. The sad part is that if the city not been meddling in this deal the car agency would still have come to Downey and the taxpayers would still have had the benefit of the sales tax dollars. What would not have happened was that a former city employee would not have had this project to put on his resume for his next employer. This is the kind of mischief that goes on in the name of Redevelopment.